Retainer vs hourly billing: which to use and how to bill

How a monthly retainer and hourly billing share the risk, one quarter billed both ways, what a retainer agreement should say, and how to invoice each.

The short answer

Bill by the hour when the amount of work is unpredictable and the client wants to pay only for time used. Use a monthly retainer when the client needs you regularly: they pay a fixed fee for your availability and a set number of hours, and you get income you can plan around. A fixed project price suits neither case; it is for a defined deliverable.

The deciding questions are how steady the workload is, who should carry the risk of a busy or quiet month, and how much admin each side is willing to do.

How each model shares the risk

The same work can be sold three ways:

  • Hourly: the client pays for every hour recorded. Quiet months cost the client little and pay you little; busy months are paid in full.
  • Monthly retainer: the client pays the same fee each month for availability and up to a set number of hours. Unused hours are the client’s cost; extra hours are billed on top.
  • Retainer with carry-over: unused hours roll into the next month, often for one month only, which softens the cost of a quiet month for the client.
  • Fixed price: one price for a defined result; overruns are your cost, so scope and change rules carry the weight.

Which one fits your work

A quick way to decide between them:

  • Requests arrive every week and the client wants a named person on call: retainer.
  • Work comes in bursts you cannot predict: hourly, with a monthly cap if the client needs budget certainty.
  • The client asks for a clear deliverable with an end: fixed price, possibly followed by a retainer for upkeep.
  • You are new to the client: start hourly for a month or two, then offer a retainer sized on the real hours.

Worked example: one quarter billed both ways

A marketing freelancer works 17, 24 and 20 hours in three months for one client. The retainer is 2,000 a month for up to 20 hours, with extra hours at 110; the hourly alternative is 100 an hour. The figures are illustrative.

Over the quarter the retainer brings 6,440 and hourly billing 6,100. The client pays 340 more for the retainer and has the freelancer’s time reserved; the freelancer gets a predictable 2,000 floor each month. With one month of carry-over, the 3 hours left in month one cover most of month two’s overrun.

  • Month 1, 17 hours: retainer 2,000; hourly 17 × 100 = 1,700.
  • Month 2, 24 hours: retainer 2,000 + 4 × 110 = 2,440; hourly 24 × 100 = 2,400.
  • Month 3, 20 hours: retainer 2,000; hourly 20 × 100 = 2,000.
  • Quarter: retainer 2,000 + 2,440 + 2,000 = 6,440; hourly 1,700 + 2,400 + 2,000 = 6,100.
  • With carry-over, month 2 uses 20 + 3 carried hours, so only 1 extra hour is billed: 2,000 + 110 = 2,110.

What a retainer agreement should say

QuoteBill’s monthly retainer sample covers the points that cause most disputes, each as a blank you set: the hours included, whether unused hours expire or carry over for one month, how requests are sent and how fast you reply, an initial period of three months that then renews monthly, and 30 days’ notice to end it. Extra work is done only after the client approves it, at a stated hourly rate, and you keep a time record to send with each invoice.

It also states that the fee is not reduced when the client uses fewer hours, that a fee change needs notice, and that third-party costs such as software or advertising spend are billed separately at cost. Read the full sample text before you sign in; it is a sample, not legal advice.

Invoicing each model in QuoteBill

For a retainer, issue one invoice a month, usually in advance, with a line such as “Monthly retainer, November: up to 20 hours” and the agreed fee. Bill extra hours on the following invoice as their own line with the hours and rate, and attach your time record. The agency retainer statement template lists several months of retainer invoices and payments with the balance still due.

For hourly work, the timesheet invoice template prints hours and rate columns, so each line shows the time behind it. QuoteBill does not track time or count hours against a retainer for you; it prints the hours you enter.

Check before you agree a retainer

Settle these before the first invoice:

  • The number of hours included and whether unused hours expire or carry over.
  • The rate for extra hours and who approves extra work, in writing.
  • The response time you commit to, and your working hours and time zone.
  • The minimum period, the renewal and the notice to end it.
  • Whether the fee is invoiced in advance or in arrears.

Questions people ask

Is a retainer just prepaid hours? Not quite. A prepaid block of hours is used until it runs out; a retainer pays for your availability each month, whether or not every hour is used, and usually renews.

What if the client uses far fewer hours every month? Review the size of the retainer together after a few months. Lowering the hours keeps the arrangement fair and the client with you.

Should I invoice a retainer in advance or in arrears? In advance is common because the fee pays for availability during the month. Whatever you choose, write it in the agreement.

Can a retainer include fixed deliverables? Yes, for example two blog posts a month, but then define each deliverable as carefully as a fixed-price job.

Next step: get it signed as an e-contract

250 Free Invoice, Quote & Receipt Templates

  • Timesheet invoice template

    Free timesheet invoice template: date, task and hours on each line times your hourly rate, with total hours and tax. Download Excel or Word, or save a PDF.

  • Agency retainer statement template

    Agency retainer statement template: retainer invoices and recharged media spend against the client's payments, with a running balance and the amount due.

  • Timesheet template

    Timesheet template to attach to an invoice: the date, task and hours worked on each line times your rate, with the total hours. Word, Excel or PDF.